[disneysteve]

Originally Posted by Exile

I think that there's another factor to consider in deciding when, how much, and whether to spend: The source of your income. Very few jobs are guaranteed for life, and if you're a working person or even a professional who depends on your wages/salary to cover your living expenses, becoming unemployed could be catastrophic to your finances. Even if you have an emergency fund, that could disappear before you find a new position.

If on the other hand you have a sure source of income, such as social security or an annuity, this might give you a little more wiggle room in planning your budget and making that occasional extravagant purchase.

I think that is more true when you are just starting out and probably don't have much in savings. As you get older, though, if you consistently live below your means and save diligently, you will have a much larger cushion to carry you through any rough spots.

My wife and I are both 44. We have savings equal to over 3 times our annual income (and probably 5 times our annual expenses). I certainly wouldn't want to burn through a lot of that money if I became unemployed, but it would be there if absolutely necessary. I certainly couldn't say the same thing 15 years ago when I was just starting out.